bostonbubble.com

GenXer · Joined: 20 Feb 2009 Posts: 703

MA economy is on life support right now. It is going, but unemployment is huge (the numbers lie of course, as usual, not showing the real unemployment). Because the economy was good before, many families had only a single earner. This is not reflected in the numbers - a huge number of people don't work.

Nobody is saying that MA economy will crash. I agree that some private employers are hiring (selectively though). Some are laying off as well.

This is a very, very slow process that can be reversed temporarily if the US economy picks up very fast. But in the long run, this state is going down, sooner or later. They will try to drag the people with them (i.e. higher taxes, outsized and unfunded pension obligations, etc). It is only a matter of time though that the people won't want to pay. Private employers may even get out of state if corporate taxes rise.

I think we are beginning to see cuts on a town level, but this is still nothing compared to what will happen in the future. The 'porkulus' funding is still sloshing in the system. Salaries are still growing for unions. The tide has not turned yet, but it will. Real estate prices have not really fallen by much where it matters. Salaries are being compressed as we speak, and inflation is picking up.

I fail to see how anything is getting better, though I'm optimistic that in the future when the tide turns and huge cuts are made to turn us around, it will get better. We are nowhere near that turning point though.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

GenXer · Joined: 20 Feb 2009 Posts: 703

The problem is that the future isn't linear. It is highly susceptible to negative (as well as positive) Black Swans. A negative one can impact our economy disproportionally. So, in other words, everything may seem fine now, but it only takes a big shock to case lots of damage to an over-leveraged and and indebted system.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

CL · Guest

My 2 cents -

1. I am not bullish on MA in an absolute sense. But I do think Boston economy has a more defensive mix than other city, say Dallas. Defensive is different from bullish. Defensive means less volatility. Boston won't hit jackpot like San Jose in late 90s, but it also won't crash like Detroit in 2008.

2. The reason of 1 is, as Boston ITer mentioned, business mix.

http://www.usatoday.com/money/economy/story/Jobs-Forecast-2011/34083932/1

I think 1) Healthcare and Education plays a larger role in Boston economy when compared to other cities. And 2) Healthcare and Education weather recessions and downturns better than other cyclical industries, unlike Manufacturing and ITs. It's not "feel good rhetoric", and you can verify with data in above link or state official data.

I do like to see the supporting data behind the "feel bad rhetoric"

Renting in Mass · Posted: Tue May 31, 2011 1:28 pm GMT Post subject:

Boston ITer · Joined: 11 Jan 2010 Posts: 269

Folks, we need mass hiring in Mass, to see a real turnaround. We had this back in the 1993 to 1995 time frame. Since many people use the whole 'past performance' notion, then they need to remember the past recoveries as well.

When hiring in in paucity but mainstay jobs are in retraction, the region changes.

Here's an example of what I mean. Let's say Reebox & Gillette lay off a 1000 persons (& BTW, this had occurred); now a research analyst from these places applies to Tufts Insur, Harte Hanks, Epsilon, and other services/data related companies for a job, if that person's original salary was $85-95K, unless that experience is an *exact fit* for a complimentary $85-95K job, he/she will most likely be seeing a downshift to a $60-80K bracket for his/her skill set. And why is that? It's because a lot of jobs are similar in scope but have subtle differences based upon industry exposure like consumer products outreach vs internal marketing for verticals.

Thus, unless this person has a key skill, which is then used by an adjacent dept, like Data Warehouse DBA, then he/she may have to take that pay cut. But then, once the HR dept gets wind of this situation, they'd rather mark the person as overqualified because they feel that anyone who was earning more earlier, has plans to leave, in short order once the economy picks up.

CL · Guest

I challenge the idea that Reebok and Gillette jobs as "mainstay", at least in current MA economy. Manufacturing is in decline (as it should be when you consider the cost disparity), but it's not only in MA but other states as well. So the jobs are lost to China/Thailand/Indonesia/etc.

According to BLS, manufacturing consists of 8% of Metro Boston economy. It's not small but not earth shattering big. Education and Healthcare consists of 21%. It would be a much bigger hit proportionally if MIT, Harvard and Beth Isarel starts firing professors, doctors and nurses at the same time.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

CL · Guest

Boston ITer - With the example you used, you seem to focus on the job loss in Financial Sector. According to BLS, Boston lost 22K jobs from 2001 to 2010 in Financial Sector. Education and Healthcare, however, added 85K of jobs in the same period.

Nationally, total financial sector employment has been flat from 2000 to 2010 (which coupled with MA job loss, support your observation that those financial jobs are relocated to cheaper locale, such as the example of Fidelity to NH, RI, TX, etc). Education and healthcare has grown 27% since 2000. So an overweight on education and healthcare may not be a bad idea.The total non-farm payroll in MA does drop by 4% (2426 from 2535) as a whole, compared to -2% nationally for the last decade.

I would love to look at total payroll (instead of # of people employed) by sector within state through time, but still digging for the data.

All I am saying is looking at one or two high profile examples and then makes generalized conclusion is very misleading, and typically not very useful.

Boston ITer · Joined: 11 Jan 2010 Posts: 269

CL, increasing stagnant ancillary positions in health care or education was the path which Buffalo NY has taken, since the rust belt, & has never had a thriving economy.

http://www.labor.ny.gov/stats/PDFs/NYS-Decade-in-Review-Appendix-C-Western-NY.pdf

The reason for it is that it doesn't bring revenue into the region. Instead, it's a value added tax on everyone else working in the area because it's a part of that conundrum of non-tradeable good/services.

The tech company I currently do projects for, had booked revenue from 5-6 continents. That's a net income generator for MA until they shut down our local office. Now, granted that that's one firm but this trend is increasing for others, as well. So true, if you pay higher insurance premiums and that allows Lahey to hire a few more X-ray/MRI techs, that's great for those techs but consider the net loss of income which now has to be made up for by higher VAT (Insur premiums) for all other workers. I have a hard time seeing how this forms the basis of a recovery. When Wyeth was in its peak, it was selling Interleukins, Coagulating factors, Protease exhibitors, etc, on a global market. When Pfizer finds a cheap backwater to re-locate this work than that global income stream goes with it.

GenXer · Joined: 20 Feb 2009 Posts: 703

I think numbers don't mean much when dealing with most economic variables, which are proven to have fat tails. What this means is that averages (or current readings) do not mean that much. What does matter is the hidden risk and unfunded liabilities, as well as future budgets (i.e. potential high impact 'shocks'). Anybody who views universities as immune to economic change is simply not smelling the coffee. The same was surely said about the housing bubble. Cities like Newton are now discussing how much or how little to cut the budget - and this is only a start. There was a couple of years' delay because of the 'porkulus' which bought municipalities a couple of years of nothing, but the bills are now due, and while the private sector is at least not laying off as much as before, public sector is very close to being bankrupt. None of this is anecdotal, by the way, but again, extreme events have a way of impacting our economy, and if there is an increasingly growing budget gap, this can eventually do a lot of damage (if the greater economy does not recover to support tax increases, for example).

In short, there is no upside that is apparent because of systemic problems that can create plenty of downside. So if I was a betting man, I'd buy myself a nice 'long' short on the MA economy.

CL · Guest

GenXer - I agree asset prices (House, stock, bond, derivative, commodity prices etc) are prone to extreme events. I would argue economic variables (GDP, unemployment, etc) is a lot slow moving. It does not make it immune to extreme, but I find people often confuse the 2.

By the way, GenXer, if you are really that gloomy and certain about MA economy, why are you still here? You are placing your most precious asset (your time, and I assume your family) in a state where you think it's almost destined to fail. Your action contradicts your argument. I ask this in all seriousness.